An era of economic inequality awaits if hospitality industry is allowed to collapse
State cannot risk workers being left behind in our ‘dual economy’
ONE of Ireland’s most important industries faces a reckoning that is fast approaching. An urgent response is needed. This response is even more urgent as the country moves to Level 3 of the Government’s Covid-19 roadmap, while Dublin is set to remain at Level 3 for up to six weeks.
Nearly 8pc of the entire country is employed in what the Central Statistics Office (CSO) defines as the ‘accommodation and food services’ sector, which includes your local pub, restaurant, and hotel.
However, according to projections by the drinks and hospitality industry – based on the Department of Business, Enterprise, and Innovation’s own analysis – almost twothirds of those jobs, 114,000 in total, could be lost by the end of 2020 and early 2021 unless Government recognises and responds to the situation.
Some regions are particularly vulnerable. In the southwest, for example, as many as 19,000 jobs are at risk. In Kerry alone, the sector employs 10.5pc of workers.
Last week, updated forecasts by the Department of Finance substantiate these concerns. In a pre-Budget forecast, the Department signalled a looming jobs crisis in the domestic economy.
While the multinational sector is flourishing, Finance Minister Paschal Donohoe has acknowledged Ireland’s “dual economy”, which he says “has become even more apparent during this pandemic”. CSO data for the first two quarters of 2020 hinted at its existence. In Q2 2020, the volume of total gross value added (which is similar to GDP) dropped by a modest 2.2pc compared with 2019, but the distribution, transport, hotels, bars, and restaurants sector dropped by 32pc.
Employment is the better indicator of the negative economic impact of Covid-19. A collapse of the hospitality industry will have a disproportionate effect on the economy and serve to widen this division, particularly among groups like our young workers.
Take, for example, the effect on the 15-24 age group, who make up nearly a third of all accommodation and food service employment. And on women, who make up more than half of employees (and more than two-thirds in the midlands and south-east).
In a typical recession, emigration can give younger people a second chance at a career and financial independence. But with travel restrictions and lockdowns, school leavers and university graduates are now effectively confined to home with few short-term prospects.
Everyone has felt the hardship of the last six months, socially, psychologically, and materially. Most businesses are worse off than they were in 2019, those in the drinks and hospitality industry especially. Pubs, hotels, and restaurants depend on the free movement and congregation of people, which are of course now greatly reduced, and on foreign tourism, which is practically non-existent.
Ireland’s so-called ‘wet pubs’, the 60pc that do not serve food, have had it hardest of all. These businesses were shut – dependent on social welfare payments for a wage while still having to meet fixed costs – for over six months and are now reopening into a world of restrictions, reduced operating hours, and general uncertainty.
A recent survey of publicans showed that almost half took on €16,000 in debt during lockdown to cover staff and business costs, one in five as much as €30,000. Dublin publicans, whose businesses have been caught in the Government’s costly and unpredictable stop-start lockdown strategy, will endure further financial strain for the next period of weeks. Or it could be months – no one knows.
The K-shaped recovery
Over the last year, you may have heard academics and politicians talk of L, U, V, and W-shaped economic recoveries, whereby lines on a graph indicating GDP dips and rises broadly take on these shapes.
But in a “K-shaped” recovery, where the K’s strokes indicate divergent fortunes for different segments of the workforce. Workers on the upward stroke – those in professional services, technology, and online retail – recover to acceptable levels as lockdown restrictions are lifted. But those on the downward stroke, in industries like hospitality and tourism, do not.
While remote working has been a welcome revolution for many, not everyone can do their job from a laptop. The CSO’s Q2 Labour Force Survey shows that the number of people in professional and technical occupations actually increased during lockdown compared to the same period in 2019, but “elementary” occupations, such as kitchen, and cleaning jobs, fell by a quarter.
There is much at stake. For many people, a job in the drinks and hospitality industry is a rewarding, lifelong career. For others, like students and homemakers, it offers flexibility to work part-time hours, providing an additional earnings opportunity that supports lifestyles and, in many cases, facilitates wider responsibilities. If a downturn in the industry means these people lose their jobs, we face years of increased economic inequality between the lower-skilled and the high-tech professional.
Regional inequality would deepen, too. In many places, especially small towns and villages, work in drinks and hospitality businesses is one of the few forms of employment available. If these business fold, their communities fold with them.
The fortunes of Ireland’s pubs, hotels, and restaurants are inextricably wound up with those of the “experience economy”, like live events and tourism. A fast recovery is good for both, while a slow decline will spread unemployment and bankruptcy on a much larger scale.
Make it easier for us to do business
Short of a time machine, no one single action, political or scientific, can undo the culmination of events of the last year. Drinks and hospitality business owners understand that they have a difficult period ahead of them. However, the Government can take direct, practical steps now to minimise economic hardship and save jobs. That means removing barriers to doing business.
Take excise. Ireland’s consumers and drinks and hospitality businesses pay the second-highest excise tax on drinks in the EU. These rates are punitive, and they directly undermine a crucial employer, tourism product, and growing export business.
In a commercial environment where restaurants are operating at 60pc capacity, pubs at 50pc, and hotels at 25pc, every cent saved counts. With a reduction in costs, publicans, hoteliers, restaurateurs, brewers, and distillers can spend more money keeping staff employed, paying off debt accrued during lockdown, and preparing their business for a tough economic period.
None of us can take Covid19 lightly. Face masks and Perspex screens are here to stay until there is a vaccine or some other effective therapy. Drinks and hospitality businesses know this, and that is why they have invested thousands of euro – some, tens of thousands – to protect their staff and customers and keep their doors open.
We must go on regardless. Businesses must stay open as much as possible and wages must be paid. What we need now is a clear plan, built in close collaboration with the Government. This plan must provide short-term support while the industry reopens and prioritise its medium and longterm recovery.
If the Taoiseach and the Tánaiste want to help our pubs, our restaurants, our hotels, our burgeoning micro-brewing and distilling industries, and all the jobs they support, then they must act now, in this Budget, and implement a package of consistent, predictable, and easily accessed business support measures. By next year it may be too late.